Shareholder Rights Directive pensions trustees

The UK government has outlined what it expects of pensions trustees under the new Shareholder Rights Directive II (SRD II), in an announcement made this month.

SRD II was introduced to improve transparency and stewardship of occupational pensions schemes so members and stakeholders could better understand their investments.

The schemes are required to document and disclose online their policy on engaging with investee companies, their investment strategy and their arrangements with asset managers.

For both DC and DB schemes, trustees must update their Statement of Investment Principle (SIP) relating to policies on financially material considerations, non-financial matters, and stewardship by 1 October 2019.

Trustees must also be transparent about the scheme’s arrangements with asset managers, including how it incentivises the manager to act in accordance with trustee policies. Trustees must also provide information about their engagement policy concerning capital structure, management of actual and potential conflicts of interest and another stakeholder. These details should be in the SIP from 1 October 2020.

For DC schemes, the SIP should be published free of charge online from 1 October 2019, while the asset manager and engagement policy should be up online from 1 October 2020.

In addition, DC scheme trustees should publish an implementation statement, reporting against the policies in the SIP, from 1 October 2020, while a statement regarding implementation of the asset manager policy should be published from 1 October 2021.

For DB schemes, the deadline to publish the SIP online is 1 October 2020, while information relating to implementation of the engagement policy, including voting behaviour, should be published by 1 October 2021.

Trustees should prepare their annual report for the previous year within seven months of the end of the scheme year.

In a scenario where the implementation statement would cover a period before the new SIP requirements come in to force – and the scheme did not voluntarily have a stewardship policy in place – the implementation statement would only be required to report against the stewardship policy in place from 1 October 2019 to the end of the scheme year.

“Trustees should begin preparations now to meet these new requirements, including revisions to the statement of investment principles by 1 October 2019. Trustees should ensure they take appropriate written advice from a suitably qualified person when preparing and reviewing their SIP,” the Department for Work and Pensions stated.

Last Updated: 28 September 2019
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